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Soybean harvest in Brazil: The high fertilizer prices spoil the profit
Photo: Roberto Pera/ dpa
South America is far away from the battlefields of Ukraine, with Argentina and Brazil two of the most important agricultural producers in the world are located there, energy and raw materials are in abundance.
The region actually has the best prerequisites for emerging from the Ukraine crisis as a silent winner.
But things are not that simple - and that is mainly due to home-grown problems.
The country that is most likely to benefit from the crises in Europe in the long term is, of all things, one of the smallest on the continent: Uruguay.
The nation between the South Atlantic and the Rio de la Plata is about half the size of Germany and has fewer inhabitants than Berlin, but it exports food for 30 million people.
According to experts, the small country could even feed up to 50 million.
Inflation is manageable compared to neighboring countries, water is plentiful, climate change is not having as drastic an impact as in the large neighboring countries.
In December, a meat plant in Montevideo sent steaks to Europe for the first time in Latin America that are one hundred percent carbon neutral.
Almost 100% of the electricity in the country is generated from renewable sources, the road network is excellent,
the ports ultramodern.
VW wants to be the first country on the continent to sell e-cars here.
One problem is that it's so far away.
Uruguay is located between Argentina and Brazil in the south of the South American continent, off the major international trade routes.
Most containers are currently traveling between Asia, North America and Europe.
»Well-off Germans and Austrians come to Uruguay«
But the distance to the hotspots of the world is now proving to be a competitive advantage: "Uruguay is a safe haven in times of crisis," says Mischa Groh, Managing Director of the German Chamber of Foreign Trade in Montevideo.
Not only since Russia's attack on Ukraine has he registered increasing interest from German investors and emigrants: »Since the euro crisis, we have had increasing immigration from Germany, then came the migration crisis and the pandemic, which increased the influx.
With the Ukraine war we are now experiencing the fourth wave«.
Initially, it was mainly large companies that settled there, but now many families are also coming who are looking for a new home.
It is mainly well-off Germans and Austrians who invest in Uruguay or settle here.
"Uruguay is an expensive country," says Groh.
»People come here who bring a lot of play money with them«.
They mostly buy land and invest in farming and animal husbandry.
"We have excellent soil and good returns," says Groh.
»With increasing climate change, scarcity and rising prices of land, this is a bet that will pay off«.
Mildred Stahr also experienced this.
She came to Uruguay with her family from Namibia 17 years ago.
Together with her husband, she set up the company Southern Connections, which advises foreign investors on investments in agriculture in Uruguay and Paraguay.
"We're working four-handed right now," she says.
»Actually, we are prepared for larger investors;
but now there are also many who want to get in with $100,000."
Everyone wants to benefit from the boom in Uruguayan agricultural products, which is fueled by the Ukraine war.
Uruguayan exports have increased by 30 percent between 2020 and 2022, increasing by 36 percent in the past three months alone.
Egypt has imported 200 percent more goods from Uruguay, Algeria 150 percent - these are countries that have previously sourced most of their grain from Russia and Ukraine.
Argentina is not getting inflation under control
Wheat plays a subordinate role in Uruguay, the country mainly exports meat, rice and soya.
The largest wheat producer in Latin America is neighboring Argentina.
During and after World War II, it was Argentina that provided grain and meat to devastated Europe.
The local economy flourished, and Buenos Aires became the richest and most elegant metropolis in Latin America.
The "rich Argentine" became a fixture in the salons of Madrid, Paris and Rome.
But the boom didn't last;
for decades, the country has been mired in a seemingly never-ending spiral of economic decline.
The nation, shaken by the debt crisis and economic chaos, should actually be thriving again as a result of the Ukraine war.
But as so often in the past few decades, Argentina will probably miss this chance for an economic recovery: It cannot get a grip on inflation, Argentina's eternal evil.
The price increase is over 50 percent annually, which is why the government in Buenos Aires introduced price controls for meat and wheat years ago.
For export, it issues quotas that are 95 percent exhausted for the current harvest.
Many wheat farmers have therefore switched to barley, which is needed for brewing beer and animal feed and fetches just as good prices as wheat on the world market - it is not subject to any price or quota regulations.
Added to this are the high prices for fertilizer, which Argentina has so far mainly imported from Russia.
“We are currently considering how we can find the fertilizer for the next sowing,” says Gustavo Idígoras, president of the Argentine granary.
“If these two factors – fertilizers and price controls – should develop positively for the producer, Argentina can expand its acreage”.
But it doesn't look like that so far: Inflation is likely to increase further as a result of the high world market prices for food, and there is no relief in sight on the fertilizer market either.
Now it's taking revenge that Buenos Aires failed to invest in the energy sector in good time.
Argentina actually has such large oil and gas reserves in Patagonia with the »Vaca Muerta« (»dead cow«) oil shale deposit that it could be self-sufficient, and it could export the surplus.
But there are no pipelines to transport the raw material to the coast and to Buenos Aires.
The government now wants to import gas from Bolivia so that the Argentines don't have to freeze in the coming winter.
Ironically, one of the most resource-rich countries in Latin America could therefore miss a golden opportunity to break the cycle of decline that has been going on for decades.
The agro giant Brazil, one of the world's most important producers and exporters of soy, coffee, corn, meat and orange juice, is only benefiting to a limited extent from the increased demand for food as a result of the Ukraine war.
On the one hand, exports are booming, the São Paulo stock exchange rose by 14 percent in the first three months of the year, and the national currency, the real, appreciated by 16 percent against the dollar.
"The rise in commodity prices is benefiting Brazil, the world's fourth largest exporter of commodities," says the emerging markets division of investment firm Franklin Templeton.
Brazil is overshadowed by political uncertainty
The agro-industry intends to expand production of corn, which is currently at record prices: “Brazil has excellent growth potential and is facing a huge opportunity,” says the President of the Association of Maize Producers, Cesário Ramalho.
»We have a market, buyers and land for it«.
At the same time, however, the production costs for agricultural products have risen drastically because transport, fertilizers and pesticides have become much more expensive.
Inflation in the country is now in double digits, hitting the poor most of all.
In some regions and slums of the big cities there is hunger again.
A few days ago, a supermarket was looted in a poor part of Rio de Janeiro, and crime has also increased.
For this year, the World Monetary Fund expects economic growth of a modest 0.8 percent, putting Brazil at the bottom of Latin America.
For 2023, the IMF predicts a meager 1.4 percent growth.
Added to this is the political uncertainty.
Brazil will elect a new president in October, with ex-president Luiz Inácio Lula da Silva the favorite.
But right-wing incumbent Jair Bolsonaro, who is running for re-election, has caught up in polls over the past few weeks.
If Lula and Bolsonaro have to go into the runoff and Lula only narrowly wins, which many indicate, Bolsonaro could doubt the result and incite his supporters to storm Congress - just like his great role model Donald Trump.
Whether the military would stand by the constitution in this situation and prevent a coup is uncertain.
That alone is cause for concern.
An election victory for Bolsonaro should also accelerate the dismantling of democracy and the rule of law in Brazil - after two terms in office, Bolsonaro is not allowed to run again,
The political uncertainty is also overshadowing a possible renegotiation of the free trade agreement between the European Union and the South American economic alliance Mercosur.
Because of Bolsonaro's disastrous environmental policy, the parliaments of several EU countries have not yet ratified the agreement;
they demand a renegotiation of the clauses relating to environmental protection, climate change and the protection of indigenous peoples.
As long as Bolsonaro is in power, the chances of ratification or renegotiation are zero.
If Lula wins, however, things should move.
"We are ready to discuss the consequences of climate change and to take them into account when renegotiating the agreement," Lula's longtime foreign minister and current foreign policy adviser, Celso Amorim, recently told SPIEGEL.
In return, he demands concessions from Europeans in industrial policy.
There is no free trade agreement with the EU with Bolsonaro
"Without a change of government in Brasilia, there is no chance of renegotiating the free trade agreement with the EU," confirms Mischa Groh from the Montevideo Chamber of Commerce.
The government of Uruguay, which is also a member of Mercosur, is therefore currently concentrating on concluding bilateral agreements.
"Any bride that comes by is taken," says Groh.
A free trade agreement between Mercosur and the EU would undoubtedly be beneficial for Uruguay, says Groh.
Regardless, he sees tremendous opportunity in the energy sector.
Ten billion dollars have flowed into infrastructure projects and alternative energies in recent years.
"Almost 100 percent of the electricity is generated from renewable energies, 63 percent of the energy matrix is green," he says.
»Uruguay has everything you need to be a reliable supplier of green hydrogen and its derivatives«.
Experts estimate that in four to eight years the country will be able to supply Germany with large quantities of hydrogen.
"Because of the Ukraine war and the resulting energy crisis in Europe, many German investors are bringing forward their investments," says Groh.
The best thing about it: Economics Minister Robert Habeck would not have to bend ideologically, as in Qatar, to justify energy supplies from Montevideo: Uruguay is two places ahead of Germany on the democracy index of the »Economist«.